Despite the consistent decline in the overall sales volume across South King County in the last three years, industry sources suggest investors remain optimistic about the future of the South Sound apartment market. One property in Auburn that has hit the market recently with an asking price of $12 million may test the interest from buyers in early 2023, although they will have to contend with a slightly unique offering.
The asset offered for sale is a land lease on the nearly 5-acre parcel located at 2830-2902 I St. N.E. The property includes two senior-living entities on the plot: North Auburn Rehabilitation & Health, a 125-bed long-term skilled nursing care and short-term rehabilitation facility; and Parkside Retirement Community, a 94-bed assisted living facility. The annual land lease generates an absolute net income of $46,560, according to the marketing documents reviewed by The Registry. The total improved area of the two buildings is roughly 67,000 square feet, with North Auburn occupying just over 33,000 square feet of the building on a land area of 83,000 square feet and Parkside occupying around 33,000 square feet on nearly 136,000 square feet of land.
The land owners divided the ground lease into two separate leaseholds in 1985. The current lessees are Underwood/Chavers (Parkside) and Elm Properties (North Auburn), with Underwood/Chavers assigning the ground lease to Parkside/Noble Healthcare in 2020. The land leases for both entities are co-terminus and will expire on May 31, 2027, at which point the property improvements will revert to the land lessor/property owner. The property is zoned R-20 by the City of Auburn, which includes allowable uses such as multifamily development, senior housing, and mixed-use development.
The land is located very close to Brannan Park, Cascade Middle School, as well as the Auburn golf course. It is also in close proximity to Auburn Way, which is home to the many shopping and restaurant outlets. The Auburn municipal airport is also a short drive away.
The asset has been owned by a private family entity for the last several decades and is offered for sale by Kidder Mathews’ Seattle team led by Executive Vice Presidents Dave Speers and Stu Ford.
The Kidder Mathews report foresees a robust future for the South King County apartment market, outpacing other regions in terms of occupancy and rent over the long haul. Traditionally an industrial haven dominated by large distribution centers and manufacturing facilities, the area is now also home to a burgeoning multifamily market. Moreover, with the advent of a new light rail transportation connection, the region can expect a further positive impact on apartment projects around Auburn and the rest of the county.
Looking ahead, Kidder Mathews anticipates that continued cap rate compression will instill confidence in multifamily projects in the area, despite short-term rental rate decreases and a potential economic slowdown in 2023, which may bode well for this Auburn offering, as well.